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JGM
JGM, Solicitor
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Experience:  30 years as a practising solicitor.
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Is it permitted for our company Auditors to put in their

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Is it permitted for our company Auditors to put in their letter of engagement a clause stating that a named Director of the company will be personal liable for any unpaid fees
JA: Was this discussed with a manager or HR? Or with a lawyer?
Customer: No, no mention was made at any time and as I had dealt with these Auditors for many years, signed the letter without noticing that this clause which I believe to be new was included. I have also found on file that the letter of engagement I signed was succeeded by a revised letter of engagement to be compliant with new rules and this I did not sign. We ceased traded and the company went into liquidation but the Auditor is now threatening to sue me personally for the outstanding fees
JA: Does the workplace operate with employees, freelancers, consultants, contractors or with unionised employees?
Customer: No we were just a small family business, I was a Director of the company in question
JA: Anything else you want the Lawyer to know before I connect you?
Customer: Not at the moment

 

Thanks for your question. It is permissible for it to be incorporated into terms of business or any other contract that a director is personally liable for fees. However it is not permissible for this to be hidden away in the small print. It has to be made plain and it also has to be accepted by the individual director rather than by the company. It appears this was not the case here and you can defend this successfully. You can look up on line the case Montgomery Litho v John Maxwell which is a similar situation to the one you refer. I hope that helps. Please leave a positive rating so that I am credited by JustAnswer for helping you today.

 

Customer: replied 15 days ago.
Thank you for your response. The letter of engagement was addressed to me as the Director and then followed with the company name and address. Where I signed was my name followed by Director but not the company name. Can you confirm that this supports your comments below i.e. this was not sent to me or signed by me personally but on behalf of the company. The clause stating I was personally responsible for any outstanding fees was not hidden but just included as a clause.
However at no time had our Auditors discussed or informed me that I was personally responsible as I would imagine this should happen.

From what you say it was sent to you as a director and signed by you as a director. That would not impose personal liability.

 

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Customer: replied 15 days ago.
Efficient service received
Customer: replied 15 days ago.
Just want to be absolutely clear with your advice. The clause in the Letter of Engagement stated the following
Personal Guarantees: Mr. M Harris & Mrs J W Harris undertake to pay personally any o/s fees to the company.
We then signed as Directors. Does this clause mean we are personally liable even though we have not signed any individual drawn up personal guarantees or were advised of this clause in advance which I believe to be a new clause but currently waiting to see previous letters of engagement.

It should be pointed out to you and not hidden in the paperwork.

Customer: replied 15 days ago.
even though the clause states I will be personally liable and I signed with this clause appearing in the Letter of Engagement?

According to the Maxwell case this isn’t enough. younsighed as a director not as an individual.